| Form 941 Employer's Quarterly Federal Tax Return | | | | the ETP is related to the employer's income. |
| Federal law requires individuals to pay taxes on their | | | | In short, the 941 return is a report of the employer's |
| income. To ensure collection of individual income taxes, | | | | FTD for a quarter of the year. The quarters end on |
| the government requires employers to withhold, and | | | | March 31st, June 30th, September 30th, and December |
| send to the government, a portion of paychecks for | | | | 31 of each year. The respective 941 returns are due |
| certain types of employees. For each of these "W-2" | | | | on April 30th, July 31st, October 31st, and January 31st. |
| type employees, the employer withholds a calculated | | | | Form 944 Employer's Annual Federal Tax Return |
| part (based on the amount of income and the number | | | | A Form 944 is a version of Form 941 for certain |
| of exemptions the employee claims) of each | | | | employers who qualify. The 944 is filed annually |
| paycheck. The employer holds these withholdings "in | | | | instead of quarterly. An Employer may use the Form |
| trust" and then sends the funds to the government. | | | | 944 instead of the Form 941 if it has FTD totaling less |
| The employer withholds three types of federal taxes: | | | | than $1,000 for the year. Typically, the IRS will inform |
| Federal Income Tax, Social Security Tax, and | | | | an employer whether to file a Form 944 or a Form |
| Medicare Tax. These three taxes should be | | | | 941. |
| separately itemized on W-2 paycheck stubs. | | | | Form 943 Employer's Annual Federal Tax Return for |
| The Employer's Responsibility | | | | Agriculture Employees |
| Unfortunately sending the employees' taxes to the | | | | A Form 943 is also similar to a Form 941, but for |
| government is not the end of an employers | | | | employers who have employees who are |
| responsibility. Employers must also pay a tax in the | | | | farmworkers. The return is filed annually for employers |
| form of the employer's matching contribution to Social | | | | who pay have paid more than $2,500 in total wages |
| Security and Medicare taxes for their employees. | | | | for the year (for all employees) or have paid one |
| Generally, for every dollar of Social Security and | | | | employee at least $150 in wages. |
| Medicare taxes the employee must pay, the employer | | | | Form 940 Employer's Annual Federal Unemployment |
| must pay a matching dollar of Social Security and | | | | Tax Return (FUTA) |
| Medicare taxes. For 2009, the tax rate for employees | | | | What is it? |
| for Social Security is 6.2%; the employer also must | | | | The Federal Unemployment Tax Act (FUTA) tax is |
| pay 6.2%. For 2009, the tax rate for employees for | | | | another tax on employers who have W-2 employees. |
| Medicare is 1.45%; the employer also must pay 1.45%. | | | | The collected FUTA tax funds are used to provide |
| Employers must send their portion and the withheld | | | | unemployment compensation to individuals who have |
| employee's portion of the taxes to the government. | | | | lost jobs. The first $7,000 an employer pays to each |
| Failure to send either the employer's or employee's | | | | of its W-2 employees is subject to the tax. Any dollar |
| portion (or both) results in a payroll back tax liability. | | | | amount paid to any individual employee over $7,000 is |
| Failing to pay payroll taxes on time will also result in | | | | not subject to the tax. The FUTA tax rate for 2009 is |
| penalties and interest for the balances due. | | | | 6.2%. This rate was scheduled to decrease to 6.0% |
| The employer is required to send their portion and the | | | | starting January 1, 2009, however, the decrease was |
| employee's' portion of the taxes to the government on | | | | suspended by Public Law 110-343 through December |
| a regular basis. These regular payments are referred | | | | 31, 2009. |
| to as Federal Tax Deposits (FTD). IRS rules govern | | | | Who must file 940 returns? |
| how often an employer must make these deposits. | | | | Most employers with W-2 employees have to file |
| Failure to make timely deposits can result in penalties. | | | | Form 940 so long as they meet a minimum |
| Additionally, failure to make timely deposits can prevent | | | | employment threshold. However, some entities are |
| tax liability resolution (i.e. Offer in Compromise, | | | | exempt from FUTA and, consequently, do not need to |
| Installment Agreement, and Currently Not Collectible | | | | file the return. The most common exempt employers |
| status). | | | | are state and local governments, federally recognized |
| FTD vs. ETP | | | | Indian tribal governments, and non-profit organizations |
| It can be easy to confuse Federal Tax Deposits (FTD) | | | | (religious, charitable, scientific, educational, and other |
| with Estimated Tax Payments (ETP). In both cases, a | | | | organizations exempt under IRC Section |
| business is making regular payments of income-related | | | | 503©(3)). For all other employers, if they meet |
| taxes to the federal government throughout the | | | | either of the following criteria they must file a 940 |
| course of the year. Additionally, both FTD and ETP | | | | return: |
| have a "quarterly" element that can also cause | | | | 1. Employer paid more than $1,500 in wages in any |
| confusion: FTD is reported on a 941 quarterly return, | | | | calendar quarter during the year |
| ETP should be paid quarterly. When dealing with a | | | | 2. Employer had one (or more) W-2 employee for at |
| taxpayer that has employees, you should remember | | | | least some part of a day (or days) in each of 20 or |
| that the FTD is related to the employees' income and | | | | more weeks during the year. |